Central EuropeCzech RepublicInflationInterest rate

Czech Republic: Policy rate decision

Today’s decision to keep interest rates unchanged was accompanied by a new macroeconomic forecast from the CNB. The inflation forecast has been lowered, but at the monetary policy horizon the inflation outlook remains almost unchanged. The CNB also expects stronger economic growth this year 3.9% compared to 3.6% previously (more in line with our 4.0% forecast). The rate decision was not unanimous, one member out of the seven voted for a 25bps hike, arguing that the economy was at the peak of the cycle. overnor Jiri Rusnok said CNB’s forecasts see interest rate increases at the end of the year, although slower than forecasted appreciation of the CZK could create room for an earlier hike. We see 50bps hikes towards end of year, with real policy rate still in negative territory